GST for fruits and medication, but not for lobsters
Several consumer group including the Consumers Association of Penang (CAP) want the government to extend the list of exemption from the goods and services tax (GST) to other vital items like canned sardines, biscuits and bread.
Despite government's insistence that people in the the lower income bracket will be shielded from the goods and services tax, several essential items appear to be missing from the zero-rated or exempt list.
The comprehensive list contains items considered to be luxury goods, such as like lobsters and oysters – whether fresh, frozen or in brine, and truffles.
While it is true that items the GST will not be imposed on litems such as rice and belacan, as stated by Prime Minister Najib Abdul Razak in his Budget 2014 speech, essential items such as fresh milk and baby formula are conspicuously missing.
Also missing in the list appended to the copy of the Budget 2014 speech and distributed to media last Friday are basic toiletries, medication and fresh fruits.
This despite dried fruits being zero-rated and healthcare services being exempted from GST, which will be implemented from April 2015 if Parliament passes the Bill.
“It is interesting that milk and fresh fruits are not in the list as the government has continued to say that food products will be exempt.
“But the Bill has not been passed yet, so I expect more items will be added to the list, which is already comprehensive now,” said Chartered Tax Institute Malaysia president SM Thaneermalai.
As it stands, local fruits are not taxed while imported fruits have a sales tax of five percent.
Thaneermalai said while lobsters are not “exactly cheap items”, people should not just zero-in on this as they are likely to be on the zero-rated list because of local production.
“There are also local lobsters, so this is a consideration,” he said.
Customs deputy director GST special unit Wan Leng Whatt was in 2012 reported to have said that such instances of luxury items being zero-rated for GST are unavoidable “limitations”.
“We wanted to zero rate basic food. We want people to be able to afford fish and prawns but at the same time, we don’t have coding for lobsters, abalone, oysters (to differentiate item types). These were simply the limitations,” Wan is quoted by Free Malaysia Today as saying.
As for fruits, he said “the low income group doesn't really eat these fruits” and that the special unit's research showed that outside the urban areas, the low-income group “grow their own bananas”.
Items widely consumed by lower income group
Meanwhile, the Consumers Association of Penang (CAP) wants the government to exempt other essential items including bread, canned sardines and biscuits from the GST..
Several essential items appear to be missing from the goods and services tax exempt list, including essential items such as baby formula and canned sardines.
“These items are taxed under the GST . However, they should be exempted as well because they are widely consumed by the lower income group...
“The GST should be imposed on high-end food items that are consumed by the high-income earners,” CAP president SM Mohamed Idris (right) is reported as saying by The Star.
Most of manufactured food items are now charged a sales tax of ranging from five to 10 percent.
Zero-rated items are items where producers are allowed to claim refund for GST paid on any production input. This is so that they do not pass the GST to the consumers.
Exempted items, on the other hand, are items where any GST paid by producers on input is considered negligible, and as such cannot be passed on to the consumers. 
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